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7 Streams of Income

Updated February 03, 2025

7 Streams of Income: The Average Millionaire Has 7 Streams of Income


Financial success often comes from diversifying income sources rather than relying solely on a single paycheck. The average millionaire has seven streams of income, each contributing to wealth accumulation and financial independence. Understanding these income streams can help you build long-term wealth and achieve financial freedom.



1. Capital Gains


Capital gains refer to profits earned from buying and selling investments, such as stocks, real estate, or other appreciating assets. This income stream is generated when you sell an asset for more than its purchase price.


How to Build Capital Gains:

  1. Invest in stocks and ETFs with growth potential
  2. Buy undervalued real estate and sell at a profit
  3. Participate in startup investments and business ventures


Example: If you buy a stock for $50 and sell it for $100, your capital gain is $50 per share.


2. Interest Income


Interest income is money earned from lending capital or depositing funds into high-yield accounts. This passive income stream is crucial for maintaining financial stability.


How to Earn Interest Income:

  1. Open a high-yield savings account (HYSA)
  2. Invest in bonds, peer-to-peer lending, or certificates of deposit (CDs)
  3. Offer private loans with an agreed-upon interest rate


Example: If you deposit $10,000 in a HYSA with a 4% annual interest rate, you earn $400 annually in interest income.


3. Earned Income


Earned income is the most common income stream, derived from working a job and receiving a salary or wages. While essential, this type of income is typically limited by time and effort.


How to Increase Earned Income:

  1. Gain specialized skills to demand higher wages
  2. Seek promotions or high-paying job opportunities
  3. Start a side hustle or freelance for additional income


Example: A software engineer earning $100,000 per year accumulates wealth through consistent salary payments.


4. Profit Income


Profit income comes from buying and selling goods or services for a profit. Entrepreneurs and e-commerce business owners thrive in this category.


How to Generate Profit Income:

  1. Start an e-commerce store (e.g., Amazon, Shopify, Etsy)
  2. Flip products like cars, furniture, or collectibles
  3. Create and sell digital products (e-books, online courses, printables)


Example: Buying a smartphone for $200 and selling it for $350 results in a $150 profit.


5. Rental Income


Rental income is generated by leasing out property to tenants, making it one of the most reliable and passive income streams.


How to Earn Rental Income:

  1. Invest in rental properties in high-demand areas
  2. Rent out rooms or units on platforms like Airbnb
  3. Lease commercial spaces to businesses


Example: If you rent out a property for $1,500 per month with expenses of $1,000, you generate $500 in net rental income monthly.


6. Dividend Income


Dividend income comes from owning dividend-paying stocks, which provide regular cash payouts from corporate earnings.


How to Build Dividend Income:

  1. Invest in blue-chip stocks with strong dividend histories
  2. Consider Dividend ETFs or REITs (Real Estate Investment Trusts)
  3. Reinvest dividends to compound growth


Example: Holding 100 shares of a company paying $2 per share annually in dividends generates $200 per year in passive income.


7. Royalty Income


Royalty income is money earned from intellectual property rights, such as books, music, patents, and creative works.


How to Earn Royalty Income:

  1. Write and publish books or music
  2. License photography, artwork, or software
  3. Develop and patent innovative products


Example: An author earning $5 per book sold can generate thousands in passive income from book royalties.


Why Multiple Streams of Income Matter


Relying on a single income stream can be risky. Diversifying income sources:

  1. Reduces financial risk in case of job loss or economic downturns
  2. Accelerates wealth-building through compounding earnings
  3. Provides financial freedom, allowing you to retire early or pursue passions


Start small by developing additional income streams gradually. Whether investing in stocks, launching a side business, or renting out property, each step brings you closer to financial independence.


By following the seven streams of income strategy, you can create lasting wealth and enjoy financial security like the average millionaire.

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